Facing growing criticism that they impede sustainable development goals, investment protections afforded by traditional international investment agreements (IIAs) are steadily eroding. Increasingly, the trend is toward provisions allowing host states greater flexibility to regulate environmental, transparency, human rights and other social impacts. At the same time, enhanced corporate social responsibility (CSR) obligations have become more common in recent IIAs.
Moreover, when evaluating investor claims, such as those grounded in stabilization or “fair and equitable treatment” (FET) provisions, arbitration panels often evaluate the reasonableness of both host state and investor conduct. Panels are less likely to find expropriation or protectionist intent, for example, if state action is deemed a reasonable exercise of bona fide regulatory discretion. If investor conduct is deemed unreasonable or unlawful, however, arbitral panels are more likely to reduce any damages award, to deny the investor’s claim and even to award costs to the host state in extreme cases. While arbitral decisions may not represent binding precedent, combined with evolving IIA language, they provide valuable insights on current trends impacting investor risk.